Saturday, 23 February 2008
Would Adam Smith Buy Fair Trade Sugar?
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I awoke this morning to news of Tate & Lyle's semi-conversion to Fair Trade. John Humphries interviewed a representative from the Adam Smith Institute and the Fair Trade Foundation. Two economic sparring partners who clearly clashed with vigour!
He's a Believer!?
I graduated in Economics and I have even read half of Adam Smith's "The Wealth of Nations". Adam Smith seemed to me someone whose views (or observations?) might have been used out of convenience. I sought in this little post, to show that in fact Adam Smith may have advocated the market-distorting Fair Trade system.
So What Does He Think?
My hopes were raised when searches for "fair" and "fair trade" yielded some results. Reading the context, however, reminded me of a very simple fact. Adam Smith lived in the late 18th century. A time when "America" was still (just) a colony, China was (according to Adam Smith) "a country much richer than any part of Europe" and Australia recently "claimed" by the British. The world was infinitely simpler and Fair Trade was as inconceivable as Digital Satellite Television.
The Point...Finally
"How many economists does it take to screw in a lightbulb?"
"I don't know...how many?"
"Two. One to assume the existence of a ladder and the other to use that assumption to reach the ceiling and do the deed"
The point is that textbook (and even advanced, cutting edge) economics makes simplifying assumptions about the world to answer economic questions like "Does Fair Trade make people better or worse off?". Our world is infinitely more complex than that of Adam Smith. The process of writing this post would have been almost completely inconceivable 50 years ago, let alone 250 years ago. In our complex world, economic theory cannot be relied upon to give us answers to questions.
Economic arguments can only be considered as one colour in a pallette of colours. Other colours - justice, politics, society, community, technology - combine to paint the world we live in.
Is it a distortion?
Fair Trade is certainly a distortion of completely competitive markets. However it is not the only distortion. Tate & Lyle has significant market power due to its size and history. This distortion is merely balanced by Fair Trade's distortions. In a simple, ideal world, neither would exist. In an ideal world, neither would money.
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